Staying with the story
The Springfield News-Sun is committed to covering Clark County’s large employers, including Navistar. The paper recently covered contract negotiations between the company and its UAW workers, and has continued to track the manufacturer it tries to regain profitability.
By the numbers:
980 — Approximate number of UAW workers at Navistar
300 — Approximate number of employees in 2010
$30 million — Navistar’s recent investments in Springfield facility
The improvement shown in Navistar’s North American trucks business in its latest earnings report is expected to continue in 2015, which analysts say is a sign of the company’s continued climb out of recent financial struggles.
Navistar’s reported second-quarter net loss of $64 million Thursday was an improvement compared to the same time last year, when the company lost more than four times that amount.
The company has a significant role in Clark County’s economy, where it employs between 1,400 and 1,500 workers at its Springfield manufacturing site, including management and contractors. Thousands of retirees from the company also live in the area.
Navistar expects continued growth in sales of its medium-duty trucks and buses, said Troy Clarke, Navistar’s president and CEO. In its most recent quarter, the company saw about a 10 percent improvement for sales for its Class 6-8 trucks and buses in the U.S. and Canada, compared to the same time last year.
“We’re bullish that medium trucks and buses are going to be stronger because margins are good there, and that’s good for Navistar,” Clarke said in a conference call with investors Thursday morning.
However, analysts at Jefferies Equity Research also said Navistar shares have been weak recently, in part because of a growing consensus that 2015 will be the peak year for the North American Truck markets. The company’s net revenue also fell about 2 percent, from $2.75 billion last year to $2.69 billion at the end of the second quarter this year.
“We disagree with this conclusion and expect orders to rebound in the fall,” the Jeffries analysis said Thursday about the North American Trucks peak year forecast. “And for Navistar, orders and share in medium duty product and buses are up — although so far the market has focused largely on heavy duty numbers.”
Navistar has been struggling to regain market share after facing several challenges in the past few years, including a failed engine technology that didn’t meet emissions standards set by the Environmental Protection Agency.
The most recent figures are a sign that the company’s finances are becoming more stable, according to an analysis released Thursday by Vicki Bryan, a senior high yield analyst at Gimme Credit, a research company on corporate bonds.
“Overall we remain cautiously optimistic for gradually stabilizing sales into next year leading to sustainable, albeit still below industry average revenue and profit growth, with rapidly improving cash flow generation and substantially improved credit metrics,” Bryan said.
Navistar also said it expects more than $13 million in annual savings this year after it sold its foundry operations in Waikesha, Wis., and plans to close out operations at its foundry business in Indianapolis by the end of this summer. The company also purchased and recently opened a 688-acre test track in New Carlisle, Ind., where it will test new products and vehicles.
In Springfield, workers are now manufacturing about 93 trucks per day, said Jason Barlow, president of the UAW Local 402. The company has been hiring to fill vacancies after retirements and work has been steady, he added.
“We’re seeing an increase and we’re going to see larger increases in medium-duty,” Barlow said. “We are building those with the Cummins brand engine and it’s a hot seller. The customers know that’s a proven engine and it’s a good product we’re building.”
One challenge the company still faces is trying to regain its share of the market, Barlow said. Some competitors have seen production increases while Navistar is maintaining stable production. The company is taking steps to reach out to past customers, and has hired some executives from competitors to help it regain some of its customer base, he said.
Barlow said he has also been contacting local elected officials to convince them Navistar’s vehicle quality has improved. This is due to better manufacturing processes, new technology and improved communications between line workers and managers, among other factors, he added.
“Yes, there were issues in the past but those issues are gone now,” Barlow said of the vehicle quality. “That’s where we’re reaching out to our elected officials and asking them to come back and support us.”
Bryan credited the company’s management for improving financial reports, but said Navistar still has a tough road ahead.
“Full recovery is probably still years away, and we doubt Navistar will emerge as a strong market leader,” she said. “But it finally has capable management in place, which appears to be gaining traction with wary customers, and is restoring profitability to the company’s drastically downsized operations.”
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